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Why Home Depot’s Q3 Earnings Failed to Impress Analysts

Rajiv  Nanjapla - Author

Nov. 14 2018, Published 12:16 p.m. ET

Third-quarter performance

Home Depot (HD) posted its fiscal 2018 third-quarter earnings results before the market opened on November 13. 

In the quarter, which ended on October 28, the company posted adjusted EPS of $2.51 on revenue of $26.30 billion. Year-over-year, its revenue rose 5.1%, while its adjusted EPS rose 34.2%.

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Stock performance

During the quarter, Home Depot outperformed analysts’ EPS expectation of $2.26 and their revenue estimate of $26.26 billion. The company also beat analysts’ SSSG (same-store sales growth) estimate of 4.7%, posting SSSG of 4.8%. After the company posted its third-quarter earnings results, its management raised its fiscal 2018 sales and EPS guidances.

Despite its strong earnings and its raising of its fiscal 2018 guidance, the company saw its stock fall as investors remained concerned about slowing US home sales. The company’s management stated that in recent years, housing turnovers have had a lower impact on its sales. On November 13, its stock fell to a low of $172.85 before closing the day at $179.0, a fall of 0.2% from its previous day’s close.

Year-to-date performance

Since the beginning of 2018, Home Depot stock has fallen 5.6%. In comparison, Lowe’s Companies (LOW) and Williams-Sonoma (WSM) have returned 2.9% and 25.7%, respectively. The stock price of the broader comparative index, the SPDR S&P Homebuilders ETF (XHB), which invests 15.6% of its holdings in home improvement companies, has fallen 21.8% year-to-date.

Series overview

In this series, we’ll analyze Home Depot’s third-quarter performance and compare it with analysts’ expectations. We’ll also cover management’s guidance and analysts’ expectations for 2018. We’ll end the series by looking at analysts’ recommendations and the company’s valuation multiples.

Let’s start by looking at Home Depot’s fiscal 2018 third-quarter revenue.


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